Short covering by investors betting on yield increases was seen adding to the Treasurys rally. Concerns after the first diagnosis of a patient in the United States with the deadly Ebola virus may have also added a safety bid.

U.S. manufacturing expanded during September but the pace of growth at American factories slowed from August, which was the best monthly showing since March 2011, according to an industry report released on Wednesday.

"It doesn't confirm what everyone was hoping to be able to trade as the fourth quarter got underway," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. Many investors have been set up for higher rates this quarter on expectations that the U.S. economy will continue to improve even if global growth continues to decline, he said.

Benchmark 10-year notes were last up 22/32 in price to yield 2.41 percent, down from 2.51 percent Tuesday. A private employment report earlier on Wednesday showed that U.S. employment grew at a solid pace of 213,000 jobs in September.

Thirty-year bonds rallied 1 10/32 in price to 3.13 percent, down from 3.210 percent at the close.

Treasurys had earlier rallied in line with German bunds after dwindling demand cut factory activity across much of Asia and Europe in September, sending it to multi-month lows and raising the chances that global growth would slow in the months ahead.

Germany sold new 10-year bonds at record low yields of 0.93 percent on Wednesday. A shortage of high quality collateral even after the end of the quarter continued to disrupt the repurchase agreement market, where many bonds were trading at negative yields, or "special."

"We have record shorts in the front end of the market, there is no collateral around, repo is very high so people are getting squeezed on their financing," said Tom Tucci, head of Treasurys trading at CIBC in New York.

The federal funds rate fell for a second day to 7 basis points. The Federal Reserve is expected to guide this rate to the higher end of its 0-25 basis point range as it gets closer to raising interest rates.

Record demand for Treasurys at the New York Federal Reserve's reverse repurchase agreement operation on Tuesday, which is meant to help the central bank set a floor on short-term rates, resulted in the Fed paying no interest on the overnight loans for the first time. Banks and investors bid more than the Fed's $300 billion daily limit for the first time, with $407 billion offered in total. Banks and the funds have previously been paid 5 basis points, or 0.05 percent, for the loan.